Transitioning Mexico into a Knowledge Economy

Recently they kindly translated into Spanish and published an essay I wrote on “Transitioning Mexico into a Knowledge Economy” in El Universal, a good Mexican newspaper. I decided it would be a good idea to include the original English version in my blog.

Transitioning Mexico into a Knowledge Economy

Mexico has a geographic complexity that has limited its ability to develop and maintain traditional infrastructure. These historical limitations would be overcome if our future competitive advantages and our focus as a country were set on developing a Knowledge-based society. The resulting Knowledge Economy completely changes the existing paradigms in relation to growth, competitiveness, employment and social development.

Mexico’s challenges

Amongst the main aspects that have limited Mexico’s infrastructure development has been its geography. Several mountain ranges and two peninsulas cut out and segment our country into small pieces. Building infrastructure -such as highways or railways- to properly connect these pieces has proven to be very expensive and difficult to accomplish. As a country, we will continue to fall short on the infrastructure requirements of our growing economy; and in turn the lack of infrastructure will continue to constrain our potential growth rate.

The Knowledge revolution could be Mexico’s opportunity to leapfrog some of these historical limitations. In a Knowledge Economy, geographical barriers are far less important. High speed networks make distances irrelevant allowing education, services and information to flow seamlessly to those places that can benefit from them. All aspects of the economy and all connected geographical areas can grow and develop as a result. This could be the pivoting point to trigger future economic growth, competitiveness, employment and social development in Mexico.

Knowledge Economy

The term Knowledge is very broad and has led to different interpretations of what a Knowledge Economy is. Information and Knowledge are even used interchangeably. What distinguishes knowledge from information is the way in which knowledge empowers actors with the capacity for intellectual or physical activity. Therefore, a Knowledge Economy interprets available information and embeds this knowledge into its products and services increasing value. The economics are no longer based on scarcity, but rather on abundance. Unlike most resources that deplete when used, information and knowledge can be shared, and actually grow through usage.

“Economic success is increasingly based upon the effective utilization of intangible assets such as knowledge, skills and innovative potential as the key resource for competitive advantage. The term “knowledge economy” is used to describe this emerging economic structure.” (ESRC, 2005)

“…the idea of the knowledge driven economy is not just a description of high tech industries. It describes a set of new sources of competitive advantage which can apply to all sectors, all companies and all regions, from agriculture and retailing to software and biotechnology”. (New measures for the New Economy, Charles Leadbeater, June 1999).

Developing a Knowledge Economy in Mexico

There are at least three aspects to consider in developing a Knowledge Economy:

A new kind of infrastructure has to be built. An information-based society requires abundant Internet bandwidth and plentiful online information.

A knowledge economy also poses new threats; legislation has to change dramatically to accommodate borderless organizations, remote workers and foreign criminals.

Knowledge clusters must be incentivized and nourished. Public policy should be focused on transitioning Mexico’s existing strengths into knowledge clusters, instead of trying to develop new ones that could take decades.

The Knowledge Revolution

By interconnecting millions of information systems, humanity has profoundly changed the rules by which states have thrived in the past few thousand years. The Internet is not only the main catalyst behind the knowledge economy; it may also be the biggest economic and social disruptor we have faced.

Countries are now at risk of becoming commoditized. Knowledge workers are highly mobile and can choose where they want to work, as well as where they want to live and pay taxes. It is becoming everyday more common to live in one country and work remotely in another one.

New Rules

With the advent of the Internet, the rules of the game have completely changed. Geographical proximity had always been an invisible organizational force behind human settlements, laws, taxes, businesses and countries. Since the first states were founded, they mainly provided two things to their citizens in exchange for taxes: security and public infrastructure. Both still need to be provided within a Knowledge economy. However, it is very complex to provide public infrastructure and security given the lack of boundaries in knowledge and information. Proximity is no longer the main organizational driving force.

Infrastructure

To enhance the Knowledge infrastructure, Mexico could start by creating a National Network with a backbone capable of connecting all major cities, universities, research facilities, hospitals and public libraries at very high speeds. Bandwidth must be an abundant resource in a knowledge economy for it is the best conduit for using, sharing and selling knowledge.

Additionally, collaboration and federated sites should be created. Networked data-bases such as theses should promote online interaction between users and producers. Citizens must get involved in creating, editing, linking and validating content. By using an unregulated model, information and knowledge start flowing and accumulating exponentially.

Mexico could also transform or further develop some of its beautiful natural touristic locations into Knowledge parks. These parks would have all the required technology, communications, facilities, housing and schools to allow foreign knowledge workers and companies to work remotely. Knowledge workers are always looking to increase their quality of life; this could be a good way to attract them.

Security

On the other hand, providing digital security is now most times beyond the country’s reach; cybercrime is global. Anonymous and borderless fraud is the fastest growing problem for all countries, including Mexico. Most criminals now live beyond the grasp of the laws they break. They can easily buy credit card numbers over the Internet and use them to steal money without ever leaving their chairs. States are having a very hard time adapting geographically limited laws to include worldwide crime. International treaties and coordinated efforts may be the only way to reduce this threat.

Knowledge Clusters

Equally as difficult, states will want to benefit from the knowledge created, sold or consumed within. Countries will have to compete to attract corporations and knowledge workers into their territory. Or in a better scenario, they need to find ways to have them spun and develop within their country. This requires local knowledge clusters.

The ecosystem required for these knowledge clusters to emerge and mature is complex and not easy to generate artificially. A country has to focus on its existing industrial clusters and incentivize the transition into Knowledge clusters. Even then, clusters are difficult to find and there are few examples of industries that could transition. Finding them is in itself one of the biggest challenges.

One example could be the Mexican entertainment industry. Mexico has had a long tradition of producing everything from worldwide viewed soap operas and movies, to famous actors and singers. The industry is still healthy and thriving. Nevertheless, it has completely missed the knowledge revolution. The video game industry is now bigger than both the movie industry and the music industry. At the current pace, it will outgrow the television industry revenue within a few years.

In Mexico alone, videogames sales will be over a billion dollars by 2010. Nonetheless, Mexico has yet to produce a single videogame. By placing proper incentives and infrastructure Mexican entertainment industry could be drawn into this new media. Most of the talent and resources are already in place, it just needs to evolve. As this one, other knowledge clusters could emerge if a focused effort was to be made by the government to find and nurture them.

Disruptions open New Opportunities

It is in disruptive conditions such as these when the playfield is leveled and new opportunities emerge. Mexico will need to act decisively to take advantage of this Knowledge revolution. We need to focus on creating a better future. We need to jump at this opportunity to transform our country.